Goldman Sachs CEO Lloyd Blankfein on the China princeling scandal

Lloyd Blankfein knows that people are wondering if his bank, Goldman Sachs Group Inc., will get pulled into the China princelings investigations. CEO Blankfein said Friday that he hasn’t seen anything that looks like a bribe-for-hiring at his bank.

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Lloyd Blankfein

While speaking to CNBC at the World Economic Forum in Davos, Switzerland, Blankfein was asked about the investigations, where authorities are examining whether big banks hired the children of Chinese elite, in exchange for getting business.

“Have you had Chinese CEOs or other CEOs that say, ‘Hire my kid and if you hire my kid, you get the job’?” asked reporter Andrew Ross Sorkin.

“I say yes to the first part but no to the second part,” Blankfein replied. “Not China specifically. I’ve had people say, ‘My kid is in such-and-such a school, really would like a job in finance. He really would like a job at Goldman Sachs
.’ … Just because he is not thinking it that way, I’m thinking about how it could look.”

J.P. Morgan Chase & Co.
has been the bank most in the spotlight for allegedly problematic hiring, but other banks are expected to be pulled into investigations. The government is involved because if Chinese government officials are involved, then the hirings may have been in violation of anti-bribery laws.

Blankfein said that Goldman Sachs has “a lot of processes to vet these things.”

But, he added that “If you precluded yourself from hiring any kid that was affiliated to somebody whose parent was an important official or an important industrialist or executive, you wouldn’t have very many people left. Who do you think the kids are that are multicultural and filling Harvard Business School?”

Blankfein is a Harvard Law grad himself. But one son is a Harvard MBA, and another is on his way to becoming one. His daughter is an undergrad at Harvard.

“Have you seen stuff that looks like a bribe?” Sorkin asked.

“Not firsthand,” Blankfein replied.

Blankfein was also asked about settling legal challenges from the government. He said his responsibility was to “learn from the past and make for a better future.”

“Frankly, look, I don’t love spending my life dealing with legacy issues but it’s part of our responsibility,” said Blankfein. He has worked at Goldman for more than three decades, and been the CEO for seven and a half years.

More from Blankfein:

The U.S.: He is optimistic about the U.S. economy but doesn’t think growth will exceed expectations.

“In the United States, there’s a big tailwind,” he said. “The deleveraging that\’s occurred, the interest-rate environment, the housing situation, energy, all favor the United States.”

The retail investor: Asked when the retail investor is coming back, Blankfein replied that they’re already back – because the big institutions are just the sum of retail investors. But he did sound surprised by those investors moving only slowly into stocks.

“By now you would have expected more of a shift from the fixed-income markets to the equity markets,” he said.

Europe: The CEO was also optimistic about Europe, citing how conditions there had improved in just two years.

A lot of work has been done, and everyone is focused on the work that needs to be done, he said. As for now, “I think we’re in the kind of muddle-through phase.”

Emerging markets: The bank chief was cautious on emerging markets, although he did say there are opportunities in this area for investors over the long term. He singled out Mexico for its more energized feel.

\”If somebody said, \’Take a position on the emerging markets and you can\’t change your mind for fill-in-the-blank — one year, five years — I\’d be long, not short. It doesn\’t mean I\’m going to feel good about it. (But) in the long run, you have to bet on growth.\”

The penalty box: On the heightened government scrutiny of Wall Street firms in the wake of the global financial crisis, Blankfein likened it to being put in the penalty box by the American public.

There are people looking over our shoulder, not only making sure we don’t deviate from the right path but also “ready to punish” us if we do anything wrong, Blankfein said in a separate interview with Bloomberg.

Asked whether institutions or individuals should be charged for illegal behavior, Blankfein pointed out there needs to be intent.

“Everyone made a lot of mistakes,” Blankfein said on CNBC. “The whole world was overleveraged. At the end of the day, a mistake is not necessarily a crime. They still have to have criminal activity to have a crime and you have to have a criminal intent to have a crime.”

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